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Can Molecular Diagnostics Drive Myriad's (MYGN) Q2 Earnings?

Zacks Equity Research

Myriad Genetics, Inc. MYGN is scheduled to report second-quarter fiscal 2019 results on Feb 5, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 43.3%. Moreover, Myriad Genetics beat the Zacks Consensus Estimate in the trailing four quarters, the average being 25.6%.

Let’s take a look at how things are shaping up prior to this announcement.

Myriad Genetics, Inc. Price and EPS Surprise

 

Myriad Genetics, Inc. Price and EPS Surprise | Myriad Genetics, Inc. Quote

Factors at Play

Similar to last quarter, Myriad Genetics is expected to gain from strong Molecular Diagnostics performance, led by solid contributions from the GeneSight, EndoPredict and Prolaris tests.

GeneSight Test

Per the company, as the GeneSight test is placed in a highly under-penetrated preventive care market, the product has huge market potential. In first-quarter fiscal 2019, Myriad Genetics saw a 28% year-over-year rise in GeneSight testing volumes. Management expects consistent growth in revenues from this test.

EndoPredict Test

Over the last few months, Myriad Genetics has been making steady progress with the EndoPredict test. Revenues from the test rose 33.3% year over year in the last reported quarter.

During the second quarter of fiscal 2018, the company announced the finalization of LCD from Noridian for EndoPredict, thereby expanding the test’s coverage to around 90% of the U.S. market.

Further, the National Institute for Health and Care Excellence (NICE) in the United Kingdom issued a revised Diagnostics Consultation Document (DCD) that covers EndoPredict as one of the three approved prognostic tests. Notably, the company projects more than 26,000 breast cancer patients in the United Kingdom annually, which would be eligible for breast cancer prognostic signature. Also, in December 2018, NICE included EndoPredict in its recommendations for guiding adjuvant chemotherapy decisions for patients with ER-positive, HER2-negative early breast cancer and are lymph node-negative.  These new developments should add to the top-line in the to-be-reported quarter.

Prolaris Test

Prolaris testing volumes grew 59% year over year in the last reported quarter. We are encouraged by the company’s receipt positive reimbursement medical coverage decision from Blue Shield of California. Per management, with this development, another 4 million people got commercial coverage under the scope of Prolaris testing, resulting in coverage for 56% of prostate cancer patients.

Furthermore, Myriad Genetics’ receipt of seven new commercial coverage decisions for the Prolaris test is expected to contribute to the top line in the to-be-reported quarter.

Hereditary Cancer Testing

We expect Myriad Genetics to continue to see year-over-year growth in Hereditary Cancer volumes.

The fiscal fourth quarter was the seventh consecutive quarter in which the company witnessed year-over-year Hereditary cancer volume growth. Further, Myriad Genetics is also witnessing impressive demand for metastatic breast cancer testing.

In October, Myriad Genetics announced the receipt of FDA approval for using its BRACAnalysis CDx as a companion diagnostic with Pfizer’s PARP (poly ADP ribose polymerase) inhibitor, TALZENNA (talazoparib). Fortifying its foothold internationally, the company has been receiving encouraging response for its BRACAnalysis CDx in Japan for metastatic breast cancer. 

All these factors are expected to maintain the momentum in the to-be-reported quarter as well.

Vectra DA

Myriad Genetics is upbeat about its consistent product diversification strategy which shows significant momentum in Vectra DA volumes. The company is optimistic about the strong clinical evidence for Vectra DA.

In this regard, the company announced results from two studies confirming Vectra test’s ability to significantly predict response to tofacitinib and track response to rituximab in patients with rheumatoid arthritis in October. Moreover, Myriad Genetics informed about endorsement of its Vectra testing for adults with rheumatoid arthritis by large professional organization empowering community rheumatologists — Bendcare — in the United States in the same month. All these developments are likely to boost contribution from the test in the fiscal second quarter’s earnings results.

Management has provided the guidance for the second quarter of fiscal 2018. The company estimates adjusted earnings per share of 36-38 cents on total revenues of $216-$218 million. 

Further, the Zacks Consensus Estimate for second-quarter revenues of $218.5 million reflects a rise of 12.6% from the year-ago quarter.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. However, this is not the case here.

Earnings ESP: Myriad Genetics has an Earnings ESP of -4.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Myriad Genetics carries a Zacks Rank #3.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Becton, Dickinson and Company BDX has an Earnings ESP of +0.49% and a Zacks Rank #2.

DexCom DXCM has an Earnings ESP of +8.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health, Inc. CAH has an Earnings ESP of +2.75% and a Zacks Rank #3.

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